ATG Athens revisited

Athens is worth another look. Earlier this year we thought that, given the clear a-b-c corrective move from the 471 low, this index had to go down and make a new low. It was at around 800 so it did go down but just a little.

Corrections can take a lot of different forms but the most common is an a-b-c down, a zig-zag. These are 5-3-5 structures and get to there target relatively fast. Often the stock or index has not gone down enough so the exercise is repeated creating a double zig-zag. This can even be repeated a third time, but not more than that. In this particular case the index comes from a little over 6500 and goes to 471. That is roughly 93%. Moreover, the two zig-zags are clearly visible and are perfectly vector equal. It all strongly suggests that the correction is complete. Further support can be derived from the simple observation that between 471 and zero there really is not enough room for another zig-zag. The 3-wave structure from the lows if that is what it is, of course, argues against this.But that may only be the a wave and now we are in the b with a c to follow perhaps to , say, 2400. In any event when all is said and done we would favour buying this index.

Fundamentally a stock index represents REAL , not nominal , assets. Therefore it is not entirely clear why the value of those real assets should drop any further. Even a default of the Greek government would impact bondholders a lot more and these we understand are 80+% concentrated in the ECB and IMF. On top of that Greece has only two industries, tourism and shipping. Tourism would get a tremendous boost from drachmas instead of euros and shipping is done mostly in US$$. So even though there will be an initial currency hit, on a slightly longer term basis this might be a real good buy.